ConversionMath

Simple LTV Calculator

Calculate customer lifetime value for ecommerce and transactional businesses using the classic formula: AOV × purchase frequency × customer lifespan.

Your Customer LTV

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Formula LTV = AOV × Purchase Frequency × Customer Lifespan

How to use this calculator

Enter your average order value, purchase frequency (average orders per year per customer), and customer lifespan (average years a customer stays active). The calculator returns your estimated customer lifetime value. To work backwards from a target LTV, choose AOV, purchase frequency or customer lifespan under "Calculate" and enter the LTV you want to reach. This model works best for ecommerce, retail, and transactional businesses where customers make repeat discrete purchases.

What is Simple LTV?

Simple LTV (or customer lifetime value) estimates how much total revenue a typical customer will generate over the full duration of their relationship with your business. The simple formula — AOV × purchase frequency × customer lifespan — is best suited for businesses with transactional, repeat-purchase models: ecommerce, retail, restaurants, consumer products, and anywhere customers buy discrete items repeatedly over time. For subscription businesses with recurring revenue and churn, the SaaS LTV formula is more accurate. LTV is one of the most important metrics in marketing because it defines how much you can afford to spend to acquire a customer.

When to use this calculator

  • Ecommerce and direct-to-consumer (DTC) businesses
  • Retail, restaurants, and repeat-purchase consumer brands
  • Calculating LTV:CAC ratios for transactional businesses
  • Setting maximum allowable CAC for paid acquisition
  • Making pricing and retention investment decisions
  • Comparing customer value across segments, products, or acquisition channels

Frequently asked questions

What is a good LTV?
LTV is meaningful only in relation to CAC. A good LTV is one that's at least 3× your customer acquisition cost. A $500 LTV is great if your CAC is $100 and terrible if your CAC is $400. Always evaluate LTV alongside CAC to assess unit economics.

How is Simple LTV calculated?
LTV = Average Order Value × Purchase Frequency × Customer Lifespan. If your AOV is $75, customers buy 4 times per year on average, and they stay active for 3 years, your LTV is $75 × 4 × 3 = $900.

When should I use Simple LTV vs SaaS LTV?
Use Simple LTV for transactional businesses with discrete repeat purchases — ecommerce, retail, consumer brands. Use SaaS LTV for subscription businesses with recurring revenue and churn — software, memberships, streaming services, subscription boxes. The two models reflect fundamentally different revenue patterns.

Should I use revenue LTV or profit LTV?
Profit LTV (also called contribution margin LTV) is more accurate for business decisions because it accounts for gross margin. To calculate it, multiply the LTV from this calculator by your gross margin (e.g., an LTV of $900 with a 40% margin = $360 contribution LTV). Many teams report revenue LTV publicly and use margin-adjusted LTV internally for decisions.

How do I determine my customer lifespan?
If you have historical data, look at how long customers typically stay active before going dormant. A common proxy is 1 ÷ your annual customer churn rate (e.g., if 25% of customers churn per year, lifespan ≈ 4 years). If you don't have enough data yet, start with a conservative estimate and refine as you gather more.

How do I increase LTV?
Increase any of the three levers — AOV (upsell, cross-sell, bundles), purchase frequency (email, loyalty programs, subscriptions, reactivation campaigns), or customer lifespan (better onboarding, retention programs, customer success, product quality). Retention typically has the biggest compounding impact over time.

How often should I recalculate LTV?
At least quarterly, and any time your product, pricing, or customer base changes meaningfully. LTV is a forecasting tool, not a historical report — the number should reflect your current trajectory, not a snapshot of 2 years ago.

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